Economic Value Added (EVA) is
a financial performance method to calculate the true economic profit of a
corporation. EVA can be calculated as net
operating after taxes profit minus a charge for the opportunity cost of the capital invested.

EVAis an estimate of the
amount by which earnings exceed or fall short of the required minimum rate
of return for shareholders or lenders at comparable risk.

Unlike Market-based measures, such as
MVA, EVA can be calculated at divisional
(Strategic Business Unit) level.

Unlike Stock measures,
EVA is a flow and can be used for performance evaluation over time.

Unlike accounting profit, such as
EBIT, Net Income and
EPS, EVA is Economic and is based on the
idea that a business must cover both the operating costs AND the capital
costs.